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A Comparison Of Forecasting Procedures For Macroeconomic Series: The Contribution Of Structural Break Models
Get PDFThis paper compares the forecasting performance of different models which
have been proposed for forecasting in the presence of structural breaks. These models differ in their treatment of the break process, the parameters defining the model which applies in each regime and the out-of-sample probability of a break occurring. In an extensive empirical evaluation involving many important macroeconomic time series, we demonstrate the presence of structural breaks and their importance for forecasting in the vast majority of cases. However, we find no single forecasting model consistently works best in the presence
of structural breaks. In many cases, the formal modeling of the break process is important in achieving good forecast performance. However, there are also many cases where simple, rolling OLS forecasts perform well
Reference distorted prices
Get PDFI show that when consumers (mis)perceive prices relative to reference prices,
budgets turn out to be soft, prices tend to be lower and the average quality of
goods sold decreases. These observations provide explanations for decentralized
purchase decisions, for people being happy with a purchase even when they have
paid their evaluation, and for why trade might affect high quality local firms
'unfairly'
The Short and Long Term Prospects for Activity in the UK Continental Shelf: the 2011 Perspective
Get PDFRegional productivity variation and the impact of public capital stock: an analysis with spatial interaction, with reference to Spain
Get PDFIn this paper we examine whether variations in the level of public capital across Spain‟s Provinces affected productivity levels over the period 1996-2005. The analysis is motivated by contemporary urban economics theory, involving a production function for the competitive sector of the economy („industry‟) which includes the level of composite services derived from „service‟ firms under monopolistic competition. The outcome is potentially increasing returns to scale resulting from pecuniary externalities deriving from internal increasing returns in the monopolistic competition sector. We extend the production function by also making (log) labour efficiency a function of (log) total public capital stock and (log) human capital stock, leading to a simple and empirically tractable reduced form linking productivity level to density of employment, human capital and public capital stock. The model is further extended to include technological externalities or spillovers across provinces. Using panel data methodology, we find significant elasticities for total capital stock and for human capital stock, and a significant impact for employment density. The finding that the effect of public capital is significantly different from zero, indicating that it has a direct effect even after controlling for employment density, is contrary to some of the earlier research findings which leave the question of the impact of public capital unresolved
On Identification of Bayesian DSGE Models
Get PDFIn recent years there has been increasing concern about the identification of parameters in dynamic stochastic general equilibrium (DSGE) models. Given the structure of DSGE models it may be difficult to determine whether a parameter is identified. For the researcher using Bayesian
methods, a lack of identification may not be evident since the posterior
of a parameter of interest may differ from its prior even if the parameter
is unidentified. We show that this can even be the case even if the priors assumed on the structural parameters are independent. We suggest two Bayesian identification indicators that do not suffer from this difficulty and are relatively easy to compute. The first applies to DSGE models where the parameters can be partitioned into those that are known to be identified and the rest where it is not known whether they are identified. In such
cases the marginal posterior of an unidentified parameter will equal the
posterior expectation of the prior for that parameter conditional on the
identified parameters. The second indicator is more generally applicable
and considers the rate at which the posterior precision gets updated as
the sample size (T) is increased. For identified parameters the posterior
precision rises with T, whilst for an unidentified parameter its posterior
precision may be updated but its rate of update will be slower than T.
This result assumes that the identified parameters are pT-consistent, but
similar differential rates of updates for identified and unidentified parameters can be established in the case of super consistent estimators. These results are illustrated by means of simple DSGE models
Joint estimates of automatic and discretionary fiscal policy for the OECD
Get PDFOfficial calculations of automatic stabilizers are seriously flawed since they rest on the assumption that the only element of social spending that reacts automatically to the cycle is unemployment compensation. This puts into question many estimates of discretionary fiscal policy. In response, we propose a simultaneous estimate of automatic and discretionary fiscal policy. This leads us, quite naturally, to a tripartite decomposition of the budget balance
between revenues, social spending and other spending as a bare minimum. Our headline
results for a panel of 20 OECD countries in 1981-2003 are .59 automatic stabilization in
percentage-points of primary surplus balances. All of this stabilization remains following discretionary responses during contractions, but arguably only about 3/5 of it remains so in expansions while discretionary behavior cancels the rest. We pay a lot of attention to the impact of the Maastricht Treaty and the SGP on the EU members of our sample and to real
time data
Regional Policy Spillovers: The National Impact of Demand-Side Policy in an Interregional Model of the UK Economy
Get PDFUK regional policy has been advocated as a means of reducing regional disparities and stimulating national growth. However, there is limited understanding of the interregional and national effects of such a policy. This paper uses an interregional computable general equilibrium model to identify the national impact of a policy-induced regional demand shock under alternative labour market closures. Our simulation results suggest that regional policy operating solely on the demand side has significant national impacts. Furthermore, the effects on the non-target region are particularly sensitive to the treatment of the regional labour market
A labor market with targeted wage offers
Get PDFWe model a market for highly skilled workers, such as the academic job market. The
outputs of firm-worker matches are heterogeneous and common knowledge. Wage setting is synchronous with search: firms simultaneously make one personalized o¤er each to the worker of their choice. With large frictions (delay costs), efficient coordination is not possible, but for small frictions efficient matching with Diamond-type monopsony wages is an equilibrium
Institutional Quality and FDI to the South An Analytical Approach
Get PDFWe ask whether MNEs’ experience of institutional quality and political
risk within their “home” business environments influences their
decisions to enter a given country. We set out an explicit theoretical
model that allows for the possibility that firms from South source
countries may, by virtue of their experience with poor institutional
quality, derive a competitive advantage over firms from North
countries with respect to investing in destinations in the South. We
show that the experience gained by such MNEs of poorer institutional
environments may result in their being more prepared to invest in other
countries with correspondingly weak institutions
Unionisation, International Integration and Selection
Get PDFWe study how unionisation affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit-centre level. With productivity specific wages, an increase in union power has: (i) a selection-softening; (ii) a counter-competitive; (iii) a wage-inequality; and (iv) a variety effect. In a two-country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit-centre bargaining, we show how trade liberalisation can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets)